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TIM Participacoes SA (NYSE:TSU)
Q3 2021 Earnings Call
Oct 26, 2021, 9:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good morning, ladies and gentlemen. Welcome to TIM SA 2021 Third Quarter results conference call. We would like to inform you that this event is being recorded and all participants will be in listen-only mode during the company's presentation. There will be a replay for this call on the company's website. After TIM SA remarks are completed, there will be a question and answer session for participants. At that time, further instructions will be given. We highlight that statements that may be made regarding the prospects, projections and goals of TIM SA constitute the beliefs and assumptions on the company's board of executive officers, future considerations are not performance to warranties. They involve risks, uncertainties and assumptions as they refer to future events that may or may not occur. Investors should understand that internal and external factors to TIM SA may affect their performance and lead to different results than those planned. [Operator Instructions].

Now, I will turn the conference over to the CEO, Mr. Pietro Labriola, so he can present the main messages for the third quarter of 2021. Please Mr. Pietro, you may proceed.

Pietro Labriola -- Director, Chief Executive Officer

Good morning, everyone. Thank you for attending our results conference call. First of all, I'd like to give a warm welcome to Camille Faria, our new CFO. In August, she joined our team and is already getting her hands dirty in a multi-part project. Either we are preparing to start or have already started and need to finish. I wish Camille all the luck and success because we have a lot to do. It is great to have her on board.

Without delays, let us move to the results. In the third quarter, we consolidated our recovery with some numbers. It is true that despite a much better pandemic situation after a step up in vaccination, macro has been more challenging. But we have no reasons to complain. This past quarter was solid and in the fourth, we will maintain the pace, which puts us in a condition to reach our targets for 2021. Also key events such as spectrum auction and Oi deal approval should take place until December paving the way to a great 2022.

In a nutshell, our high level execution led us to post LT figures in the third quarter. Service revenue grew more than 4% year-over-year, driven by mobile ARPU, which also expanded over 4%. On the fixed broadband front, we have just launched the best high speed offer in Brazil to accelerate further our business. EBITDA was up 4.5% and we are now at 21 quarter of positive yearly growth.

With some BRL85 million in customer platform revenues which let us very well positioned to reach our annual target for this year. This quarter was also marked by a remarkable achievement in the ESG arena. I'm proud to say that we are the first Brazilian company to be included in the Refinitiv Diversity Inclusion Index and we are the number one telco in the world in this ranking.

Detailing our revenue dynamics, we saw positive contribution coming from mobile and fixed services with all major lines improving. We also deliver a sequential expansion versus this second quarter, showing the consistency of our operations. Mobile service revenue grew 4.1% year-over-year. In parallel, fixed service also posted a solid evolution, up by 5.5%. With TIM Live driving this trend back temporarily at this lower pace as we were expecting and mentioned during our last call. Our main month numbers are rock solid both for mobile and fixed services that is why total net service revenue is growing more than 5% year-on-year.

Those results once again, show our choice to focus on a value strategy is paying off. We are outperforming our peers in the ARPU dynamics and this September, our ARPU grew high single digit while the rest of the market fell mid single-digit. It clearly demonstrates our ability to produce additional revenues more rationally and efficiently. The main drivers behind the volume to value strategy remain a differentiated offer and the upselling proposition with migration to higher plans and improving the loyalty from clients. To add the new level, we have been working to improve the quality and value of our sales with broader and qualified distribution channels.

The differentiation aspect of our offer is an ongoing effort. We have been adding multiple differentiation layers in each segment to keep ahead of the competition and sustain our leadership. In postpaid, we have bought from the entertainment app to a one-stop shop content and service marketplace. In control, we are focusing on the benefits of our cash consumer platform partnership to enable our clients to have new experiences and in the prepaid, we have been targeting convenience and loyalty since the launch of the TIM Pre TOP.

I just mentioned, the importance of our customer platform partnership to well differentiate our offers. Since this part of our strategy is gaining more and more traction, it is worth remembering how we play this game of client base monetization to generate new revenue streams and equity diversification.

First, I need to remark that we have two business models of partnerships under this framework. In the commercial one's, we have a more traditional approach where we are remunerated monetarily per video views and clicks for advertising campaign and data intelligence services. Any company seeking relief and consultation increase, lead generation and upping stores is a target for us.

On the other side, this strategic partnerships are built and there are more symbiotic relationship and our targets are scale ups seeking exponential growth. TIM is remunerated by CSC fees and equity stakes in return for our endorsement for giving access to our customer base and commercial capillarity for being bundled with our core offer portfolio and for data intelligence. Both modest leverage TIM Insights and TIM Ads platforms to target the suitable classes inside our base and impact then through channels within their journey as a client of TIM. Under this framework, we listed some verticals as having great opportunities for being more directly connected to mobile phone services and adding a higher evaluation then the telco companies. We are already operating in some of them, so we have clear result to show.

As mentioned before, we summed BRL83 million in revenues in the first nine months of the year. Mobile advertising is contributing with BRL26 million while financial and the location services are having the BRL57 million. We earned subscription bonuses equivalent to an equity stake of close to 4% in C6 Bank, following a record number of open-end accounts.

In less than two years, over 5 million clients accepted an offer from our partners, buyers and channels. And we multiplied by 10 our episodes results within September and January. We continue working to grow this ecosystem of partners similarly to a private equity firm. So we are developing multiple fronts, for example, discussion with the local content providers have accelerated and this partnership is cutting ahead of others taking longer to materialize. We are at the final phase to choose a partner for [indecipherable] initiatives with seven solid proposals on the table.

Digital war like the market place discussions are taking longer than expected and we are refining our approach considering new market dynamics. Lastly, we continue to work on IoT verticals with large contact being negotiated.

To complete our revenue drivers discussion, let us move to fixed services, specifically TIM Live operation. The highlights of this quarter are the completion of the FiberCo deal. The major launch of the best FTTH offering account. FiberCo closing is expected in mid-November. Under this deal, we will receive BRL1.1 billion in secondary with the vehicle receiving BRL600 million as primary. TIM will remain with 49% of the capital. Remembering that the rationale for the deal was to accelerate the fiber rollout, we expect to do some catch-up in new cities coverage.

We are launching the one giga offer as we promised. Some of you may think, there are already one giga offers in the market. Well, I must tell you this is not the same things and and I will explain why. We have the best download and upload speeds combination, one giga for downloading and 700 megabits for uploading. The offer will be available in all cities we cover meaning iron markets that do not have access to this type of speed. We have an exclusive set of content embedded in the offer such as Netflix, Paramount Plus, Disney [Phonetic] and Ben News and Ben Sports. And to complete, we are setting the offer price at an accessible level. So this is not been offer to just position TIM Live as having the highest speed, the goal is to give people access to the next level of experience in broadband.

Meanwhile we maintain a decent performance in July. Even if the expected deceleration was confirmed. The fourth quarter is already showing signs of reacceleration.

Moving to infrastructure. We saw our 4G corporate leadership be reaffirmed with the sound expansion of 25 more cities. 4.5G coverage grew at disassembled [Phonetic]. We continue working on the preparation of our network to receive dual customers. Massive-MIMO and Site modernization keep accelerating for this purpose.

On the IT front, we completed another step of our journey to cloud transformation. Our CRM system was transferred entirely to the cloud, producing a 50% reduction in attendance time. An another key accomplishment for TIM was the result of the trials with 5G stand-alone in Rio and San Paolo. We were the first ones to test the technology in the two most important cities of the country. We were capable of reaching various speeds with low latency levels, but more importantly we prove the technical feasibility of combining V16 with carrier aggregation to expand the coverage by more than 69%.

Talking about 5G. We are very close to the spectrum auction. It is scheduled to occur in the next week on November 4th. We have been saying since the beginning of the auction discussion, the choice is made by Brazil on how to approach 5G were unique and wise. The focus on the investments and network rollout will benefit the entire industry. But most importantly the end-user. TIM is ready to participate in the auction and optimistic about the outcome.

Leaving the infrastructure discussions and moving forward to our opex and EBITDA trends. This quarter, we have a more comparable base for our costs and expenses. Our dynamics are way below inflation despite spikes in different indices. We saw a more yearly expansion of our opex of 1.3% in the third quarter and below 6% year-to-date. As explained last quarter, the latter was mainly a consequence of the opex performance in the second quarter of 2020. If we compare to the first nine months of 2019, our year-to-date opex was flat. TIM continue to execute well on cost control, digitalization projects and bad debt and while improving energy cost management. These together with a solid revenue contribution drove EBITDA to grow 4.5% in the third quarter with a margin expansion to reach 48%.

Net income rose sharply more than 20% and capex was up 5.5%. In this context, operating free cash flow for the first nine month of the year grew more than 40% surpassing BRL3.6 million, which drove our net debt down almost 30% and a cash position of BRL7.4 billion. We have been preparing for the upcoming events of this year ends and 2022.

Considering our free cash flow is performing better than expected, we should be able to sustain the level of remuneration to shareholders, even if we expect large disbursements in the next 12 months. Closing my comments, I want to remark on the solid execution that TIM is delivering with robust results amid a sluggish economic recovery. Our pace, we continue in the fourth quarter. So we are very confident, we will meet the guidance given to the market.

Anticipated, we posted more than 5% expansion for service revenue and EBITDA. Customer platform is just that BRL17 million away from the BRL100 million target. EBITDA minus capex over revenues stood that 24%. And finally, net income grew more than 70% year-over-year. By the end of 2021 we should the FiberCo deal close, the 5G auction completed and we hope the Oi deal approved.

We expect to enter 2022 with less uncertainties and ready for the sector transformations and there is still room for more than another customer platform contract to be signed before the year-end. Stay tuned. Thank you. We will now open the floor for questions, please, operator.

Questions and Answers:

Operator

Thank you, Mr. Pietro. Now we will begin the Q&A section. First, we will take questions from analysts followed by the general public, both in English. If you are listening through webcast, your questions can be sent by chat. [Operator Instructions] The first question comes from Mr. Bernardo Guttmann from XP.

Bernardo Guttmann -- XP Inc. -- Analyst

Hi. Good morning everyone. Thanks for taking my question. Actually, I have a few questions related to TIM Live and I would like to stress the soft numbers this quarter. I wonder if you are facing greater pressure from competition and if so in which areas, any specific region. And the last question in relation to the FiberCo deal, what are the next steps for closing the transaction. Thanks.

Pietro Labriola -- Director, Chief Executive Officer

Thank you, Bernardo. Let us start from answering to the second question. So the good news. So then I leave the stage to Mario to put some more details, but what this means is the approval by Anatel of the deal that, if I'm not wrong, Mario communicated So if it is confirmed, Mario will give you live these new -- we will have the closing by November 9th. So on track with what we told. Mario, I don't know if you want to give some more color?

Mario Girasole -- Regulatory and Institutional Affairs Officer

It's correct. Yes, there was a prudent to date, we had the formal certification of the approval.

Pietro Labriola -- Director, Chief Executive Officer

Then Bernardo, let us come back to the first question. It is -- let me say a little more complex, but first of all, I would like to highlight this, we are always transparent with the market. If you remember in the second quarter results call, I already explained to everybody that our expectation for the first quarter should be less positive than the previous one, so it happened, exactly what we were thinking because if you manage a company, you should not discover things live, but you plan, understand the results. So first of all, this quarter, as I mentioned at the -- in the second quarter, it's weaker than the previous one, but we are already seeing that the fourth quarter will show sign of improvement, that will be back close to double digits and we expect then the next year to further reaccelerate with the stronger double-digit growth. The reason why was that our FTTC area, suffered the most compared to other areas. But again, we are accelerating on. So all the activity for what we call the brownfield activity migration from FTTC to FTTH to allow us to stay in a more comfortable situation in terms of competition, but again what is important to remember that is exactly what we mentioned since the second quarter. There is no surprise for anyone because we exactly told, weaker third quarter, better fourth quarter and better 2022. And exactly as we mentioned in the last call, we were able to launch the first one giga offer. Again, as I told during the speech, someone can say that this is not the real first offer one giga. Let me say, it's the first real one giga offer with the 500 megabit per second of upload so also on the fiber, everything is proceeding, the closing will happen on November 9th. So we show to the market that what we say, we deliver. And on the operations, we are already back to recall there from what has happened in the third quarter.

Bernardo Guttmann -- XP Inc. -- Analyst

Very clear Pietro and Mario. Thanks.

Operator

The next question comes from Mr. Diego Aragao from Goldman Sachs.

Diego Aragao -- Goldman Sachs -- Analyst

Yes, good morning. Thank you for taking my question. First question is regarding the capex Pietro, you mentioned that you have been making investments in order to prepare TIM network to receive foreign mobile business. So can you just help to understand what exactly are those investments and how much you have been invested so far and the second question is regarding the tax credit recognized in the quarter, can you just comment quickly what exactly is this about and whether there should -- you expect more of these creditors to come. Thank you.

Pietro Labriola -- Director, Chief Executive Officer

Let us start from again, the good news. So I will leave the stage to Camille to explain the good news related to the tax. Please Camille.

Camille Loyo Faria -- Chief Financial Officer

Hi, Diego. So just to explain a little bit on the tax credit. There has been a positive outcome on a leading case to exclude taxation over interest on successful judicial tax disputes, it was actually not our case that got already judged. But in our case, when our dispute is finalized, it will generate roughly BRL535 million of tax of recoverable credits and we have booked that already in our balance sheet. We expect to be able to start using those credits probably within a year. So it's a short-term positive effect.

Diego Aragao -- Goldman Sachs -- Analyst

Thank you Camille.

Pietro Labriola -- Director, Chief Executive Officer

I will leave Leo to give some more details, but what I would like to highlight that the 24% capex on revenue, it's 24% because we put as we declared in the plan part of capex, if I am not wrong, BRL300 million-BRL400 million were related to the preparation of the Oi deal. So you can also to try to do a pro forma what could be our real capex if we shouldn't have spend this money to prepare. And last but not least, keep in mind, and I want to stress that we are posting all these number in terms of EBITDA and capex, absorbing all the difference that are related to the macro situation, so exchange currency rate were able to serve an impact that was between BRL50 million and BRL70 million of exchange currency rate impact. About inflation, about the so-called Bandeira for the Portuguese people, it's quite clear what it is for the other one, it is the increase on price for the energy and all in all, we were able to offset the cost increase for inflation, currency rate and all the other issues for something close to BRL200 million in the year. So it means that -- if we shouldn't have been this divergence from what we planned at the beginning of the year, our EBITDA level should be much higher, it show our capacity to deliver and continue to manage efficiency in our [indecipherable]. But now, I leave it to Leo to explain what we are doing.

Leonardo de Carvalho Capdeville -- Chief Technology Officer

In fact, the -- what we did this year was to prepare the network to absorb this spectrum that we are receiving front ways. So we need to prepare the electronic part of the radios to support our spectrum and the Oi spectrum. So we can highlight that most part of the investment to prepare the network is already done this year. So what is the effect. In the next year, when we have the deal close it, we will receive the spectrum and ahead of that we will be ready to support the customer that are for Oi. The second part of the investment, we will be rearranged the tower let us say fueled goal because that we need in the second part to switch off some towers in Oi and to observe other towers in our network, but again the most part of the investment is done this year. So, it is good, because in fact we are observing that as Pietro mentioned in our our recurring capex. So we not expected a peak for the next year to finish the Oi integration.

Pietro Labriola -- Director, Chief Executive Officer

Then complement the question of Leo, we invest part of demand, the money in the so-called Massive-MIMO technology. We were the first player in Brazil to use this technology. This technology allow us to have a better level of efficiency on the frequencies. Why we do that? Because we are left to migrate the customer base of Oi before on our frequencies and then once they will be migrated the customer volume in on the TIM network, on the collateral network, on the Vivo network, we will have the chance to get the frequencies of Oi and add on our frequencies. So these activity were something that we needed to be able to ask the Oi customer base on our network. This is reason for which we did that in advance.

Diego Aragao -- Goldman Sachs -- Analyst

That's clear. Thank you Pietro and Leo. And maybe just a quick follow-up and to wave off any concerns with this shortage of semiconductors Leo that have been, I don't know maybe affecting the negotiations with the vendors. I just want to hear from you, if you are seeing any impact at this point for your capex plan. Thank you.

Leonardo de Carvalho Capdeville -- Chief Technology Officer

No, Diego we didn't have any kind of a constrain about data and any delays in terms of delivery. So we are not suffering that because we planned data before we feel the supplier, so they are delivering what they promised. What all we can see is that probably in 2022 for the 5G, may be, but not just for the semiconductors crisis, but both for the demand we will require us to be more assertive on the this planning. But again, we have the plan for the two years. So we are, let us say, make all the forecast with the vendors and that they are delivering as they promised.

Pietro Labriola -- Director, Chief Executive Officer

Diego, sometimes we have experienced some delay in the delivery on the onset, but this is market wise. So there is no specific issue and it was specific in some period of time. So this is something that is not impacting our strategy.

Diego Aragao -- Goldman Sachs -- Analyst

That's clear. Thank you Pietro. Thank you Leo.

Operator

The next question comes from Mr. Marcelo Santos from JP Morgan.

Marcelo Santos -- JP Morgan -- Analyst

Good morning, thanks for taking my questions. I have two, the first one would be a follow-up of Bernardo's question on TIM Live. I was reading the note -- our notes from the second quarter and you made it very clear that there was going to be a deceleration. You also commented that you expected revenue growth to reaccelerate toward 20% year-over-year in the first quarter of '22 at the beginning of '22. Do you still think that the 20% or close to 20% is credible or are you now more a little bit more cautious. Just wanted some clarification on this previous comments and the second question is about, if you could make a general comment on the mobile competitive environment, how things are trending and in the third segments postpaid, prepaid and then control. Thank you.

Pietro Labriola -- Director, Chief Executive Officer

Sorry, can you repeat the second question, because I was unable to catch up it.

Marcelo Santos -- JP Morgan -- Analyst

Sorry, the second question was regarding the mobile competitive environment. So if you could make a comment how the main segments prepaid, postpaid and control are evolving.

Pietro Labriola -- Director, Chief Executive Officer

Yeah. So let us start from the first question. For the next year, I told that we go-we are going to reaccelerate and we will be able to post double-digit growth in the next year, then we are now seeing if we will be closer to the 20% but for sure, it will be double-digit perhaps could be closer to 50%, but let us see as what is happening and which is the speed -- the exit speed for the year -- for the fourth quarter. But in any case, as I told, we are going to reaccelerate and will be for sure above double-digit growth. About the competitive scenario. What is happening on the market. I think that and I'll try to put also an answer to different question that you receive, thanks to God been some way, the three players in the market are playing different strategy. There is someone that is more on volume or integration, there is someone that is much more on quality and premium, there's TIM that is working much more on innovation. So I think to avoid any kind of misunderstanding that the market is still rational because each of us has a specific positioning. You can understand, we are the innovator. I think that in this speed of collateral is suffering something more because the integrated offer fixed and mobile is starting to find some more difficulties to proceed. Also because they are losing much more on the ultra broadband and so this is something that also that are leveraging and Vivo, if I'm not wrong did in the third quarter, a price up. That is a sign of rationality on the market. This is mainly control and postpaid. What is happening is that, and this is important also to explain how we think that we can sustain the ARPU growth in the next quarter is that when you see postpaid and control, the amount of giga that we put in each of the two offer are different. So once the customer want and need an higher volume of giga or if they want a high level, an higher level of the quality of service, they have to migrate from control to postpaid and this is exactly what we are doing in this period that is allowing us to sustain the ARPU growth, this is control and postpaid. So as the prepaid in the past was the so-called, let me say the swimming pool, where we were fishing customer to migrate to control, now the control is becoming the swimming pool that where we are fishing to move customer from control to postpaid with an higher level of ARPU. On the prepaid -- and so all in all, the market still rational, our strategy is different from the other. And the result are demonstrating that we are able to continue to deliver ARPU growth. When we move to the prepaid also the prepaid is still rational then our performance is different from the other because what is happening there, is that we always declare that our prepaid customer base is much more sensible to the macro. So if you remember, we were the player that pay the most the COVID situation in the second quarter of the last year and we were the player that gained the most in the third quarter, so the comparison year-over-area in the third quarter show us and put us in a negative area but when we see quarter-over-quarter, we are continue to grow. About the movement of the different player, Vivo did an increase in the face value from BRL10 to BRL12 and so I think that also in the postpaid -- sorry also in the prepaid, we are seeing signs of rationality. So the market is still rational. That doesn't mean that we are not competing. All of us have a different strategy. Last but not least, and so I can anticipate once again some other questions. I always repeat that we have to evaluate TIM not just on one line on KPI but on the overall result and performance because we are approaching, and we are posting revenue increase. We are continue to post EBITDA increase and we are continue to keep the pace of EBITDA of 48% so it's quite difficult to find in the market a player so complete as TIM putting all the KPI. Plus, sometimes you are not the best on one of these KPI. But at the end of the day, you are asked to deliver continuous revenue growth, to continue to be efficient, to continue to put level of EBITDA and to continue to keep under control our capex expenditure. And last but not least, we are continue to generate cash.

Marcelo Santos -- JP Morgan -- Analyst

Perfect. Thank you very much.

Operator

The next question comes from Mr. Carlos Sequeira from BTG Pactual.

Carlos Sequeira -- BTG Pactual Research -- Analyst

Hi, good morning everybody. Thank you very much for taking my questions. Hi Pietro, synergy TIM community. So my first question is on the fiber strategy and I was just wondering here if it will make sense for TIM to explore other alternatives to accelerate growth in the fiber business. Maybe, I don't know maybe looking into M&A of tonnage is evolving in the hundreds of ISPs are operating in the market or may be reaching a deal with Oi, infra call no longer Oi but with infra call which is already covering millions of homes in the country, so I was just wondering if you are considering exploring other alternatives, you should grow faster and take advantage of all that is happening on fiber. So that's the first question guys. Thank you.

Pietro Labriola -- Director, Chief Executive Officer

Thank you. Yes. I am direct with the answer. And is it all the time. I think that we are that the player in the market with much more optionalities compared to the other. I can explore the possibility -- Carlos can you switch off the microphone because we can hear you while you are typing on the keyboard. Great. So as I was mentioning also in the other call. We are the player with the highest number of optionalities. This is a market that we changed in the next 3-5 years several times and to have the opportunity, to have optionality, to change and move our strategy is very important. For example, for the question that you asked, we can sign an agreement also with other players to use other infra call to increase and speed up our strategy to cover Brazil. This is something that could be much more difficult for other players. So I can sign an agreement with Beta, I can sign an agreement with the infra call or Vivo or I could buy some infrastructure or better rent some infrastructure from some ISP, what I can assure that is not in our mind to buy and any small ISP or big ISP also because as explained several times their business model today is a business model that is sustainable, because they exploit a fiscal advantage that we couldn't exploit. This is the many issues. Sometimes you can have a discount someone do not use SMS and use just other texts, they have a competitive advantage in terms of price of something close to 15% that is something that the market will evaluate in the following years. But again, we are open to discuss with other players to use other infrastructure, but we can assure that we are not interested to buy customer base or more ISP.

Carlos Sequeira -- BTG Pactual Research -- Analyst

Perfect Pietro. That's very clear. And if I may, on a different subject. We are all waiting for CADE's approval of the Oi transaction, the transaction will be Oi Mobile assets and there is a deadline. Well, in theory, a deadline on November 18th for CADE to announce the decision. So my question is, would you expect them should do that and announce the decision by by this first deadline, which is November 18th or do you think they might ask for extra time and extended the time to 330 days, which would push decision until 2022. Do you have any view or any sense on what you expect from here. Thank you.

Pietro Labriola -- Director, Chief Executive Officer

But I think that, again, I want to start with the good news. I don't know how many of you have the chance to see that during a public hearing in the commission of the Brazilian Parliament, Anatel [Technical Issues] Carlos, again. Okay, perfect. During a public hearing a representative of Anatel clearly stated that from the Anatel point of view, the Oi deal has no issue, could be approved with more remedies on MVNO and roaming, so this is the first good news about Anatel. About CADE, I continue to be optimistic, but we are in a situation in which I don't want to push too much an institution as on the acceleration or not, because I think that they are doing their job, they are analyzing everything. I think that the Anatel position will help also to clarify the point of view of another institution. But again, I continue to be positive about the fact that we can have by, let me say, at the end of this year an approval. But I don't want to stress too much because we have to leave the institution to do their job and their analysis, but my position continue to be positive.

Carlos Sequeira -- BTG Pactual Research -- Analyst

Thank you so much.

Operator

The next question comes from Mr. Leonardo Olmos from UBS BB.

Leonardo Olmos -- UBS -- Analyst

Hi, good morning everyone. My question is regarding the 5G incremental revenue. I know we discussed that quite a few times in the conference call. But just could you provide an update on developments on B2B clients that reach you regarding projects or specific industry verticals are looking forward to implement 5G. Has it got additional attention on that matter has our overall. Overall, can you provide a color on 5G incremental revenue? Thank you.

Pietro Labriola -- Director, Chief Executive Officer

Leonardo, I think that we were discussing now with Camille after the auction perhaps, it could be useful if we show to all of you the result of the auction. The reason why and the business case, that is related to each of the frequencies that we hope to buy and store for sure after the 4th of November, after the adjudication of the auction. We will spend much more time to give you more details. As we mentioned, also in the previous call, we foresee 5G as a good opportunity for sure to optimize our network capex because 5G technology is able to gather and carry on an higher volume of data and being the more -- the data grow one of the line of monetization, this is an important element, if I'm not wrong 5G antenna is able to carry on 5x a 4G antenna in terms of data. About revenues again, we will have two different line. The first one is related to the traditional B2C business because with Alberto, we are seeing that as moving from 3G to 4G, we have an increase of data consumption. We image hat moving from 4G to 5G, we will have too, an increase of data consumption and if our bundles, are controlled in terms of giga that we put inside. This will be an opportunity to upsell. We are doing all the calculation but it's clear that we are waiting some more months to see which is these amount of data traffic growth. When we move on the B2B and then I will leave to Alberto, if he want to put some more color on that. There are two areas that our car manufacturing and agro business where we are perceiving an interest of different player to work on that. About the agro business again, we are evaluating if at certain point, it will be not the case to create a separate company to exploit the opportunity that will arise from the agro business. Keep in mind that with Camilla in the new plan, we will evaluate to create some internal business unit ready to be spin enough to unlock value in some area that could be interesting. And one of these areas IoT, Internet of Things mainly on the agro. But I leave Alberto, if he wants to put some more color on that.

Alberto Mario Griselli -- Chief Revenue Officer

Hi. Thank you. Pietro. Yes, on the B2C, the monetization of higher data consumption is our main focus areas we Pietro described. So we are going to -- in our network, the average consumption is around 5 giga per client and every time we put giga, we see customer using it in our more for more strategy and so 5G is going to be another lever for this to happen and for well concerns of B2B, we are discussing with some clients primarily in logistics at this stage the use of a 5G to provide benefits to their plans. We are running a few pilots in the automotive. Now of course everything restricted because there is the frequency are not available yet, but we see interest primarily in manufacturing and logistics. For us, our objective is to win the customers that we are doing in the main verticals in 4G because 4G already provide a lot of digitalization opportunity for our corporate customer processes and to be there for well position when of 5G mature to increase the benefits for our customers. So at this point in time is, our primarily focus is 4G coverage for these customers and with some of them we are discussing 5G pilots.

Pietro Labriola -- Director, Chief Executive Officer

So Leonardo, we escape to give you some number, but I think that the answer of Alberto is quite clear. We want to increase our penetration on the corporate segment in IoT on 4G, because it will allow us to do upselling with 5G.

Leonardo Olmos -- UBS -- Analyst

Quite clear. Okay, thank you very much. Have a good day everyone.

Pietro Labriola -- Director, Chief Executive Officer

You too.

Operator

The next question comes from Mr. Trigement from BOST.

Unidentified Participant

Hello, everyone. Good morning. I have two questions here as well. The first one, you already mentioned a little bit about the ARPU increase, but just wondering and I know ARPU is not of push to make this compares but still it is why we have you are already in-line with Vivo pretty much and 25% in cloud whenever that it up again, there a lot of things involving these afterwards, do you see room for ARPU to continue to increase at the race that we are seeing. Again, you're almost one of the, with the highest ARPUs in the street, this will be my first one and then the second one related to the platform revenue again fortunately you performed well and when I look at the partnership with C6 Bank, are we about to reach a ceiling you are seeing that or these strong trend that we're seeing in the last quarters you believe there is room to grow? Okay, thank you.

Pietro Labriola -- Director, Chief Executive Officer

Okay. About ARPU increase, yes we foresee the opportunity to continue to ARPU increase. Keep in mind that for example, next year we have to recover in some, we also on the price that we have on our customer, the inflation of this year because we did our price up in March. And at that time, we applied the inflation rate that we have reach until March. So next year in March, we are already planning to find a price up jointly with an increase of data consumption, that will allow to keep the level of claims at the lower level to recover inflation. On top of that, as I was mentioning at the beginning the ARPU increase come also from the migration of customers from lower, cheaper plan to an higher price plan, I was mentioning the migration from control to post by sometimes we have also the migration from control to control. Then when you discuss about price. Again, you have to discuss -- you have to check also. The face price that we have on the market from the so-called below the line. So when you look at the ARPU above the players, sometimes you can see that there is someone with a lower ARPU because in the so-called below the line offer perhaps they are very aggressive sometimes up and that also to try to convince customer to embrace a convergent offer the mobile price has been aggressive but theoretically is exactly the contrary of what someone say about the convergence because it convergences to put a much lower price to put things together, I don't understand where is the real value. But again, each of us has a specific strategy, it's not me that have to evaluate that which is the right one. Our strategy is to continue to increase the ARPU through the price up that we have to do every year, to try to absorb the digitalization in a period like that we're inflation is Let me say a challenger. In the meantime with our marketing strategy to move customers from lower giga package to higher giga package and creating a a kind of scale up also in terms of quality of service is, for example, as happen with the credit card. If you are a Black a credit card usually, we have a concept, you have a level of 70 that is much higher than a traditional credit card. We are doing the same also with our postpaid and with our TIM Black offer. About platform revenues, I will leave Renato to talk but again, you know very well, how we are in this moment, we are in the middle of discussion with our partner and so we cannot do too much disclosure but Renato, please.

Renato Ciuchini -- Vice President, Head of Strategy & Transformation

Hi Fred. Thanks for the question. I think we have been very successful with the consumer platform partnerships and also in the financial services, leveraging our data intelligence in our, I would say, multi touch points approach that we have with our customer base in terms of messages that go, not only text but also video, gif, images using our data insights that we have here. So this has been a very successful, I would say deploy. We were able to prove to the market how powerful it's a Telecom as a channel for the new digital services. Specifically on your question, I think we will be able to hold the level that we have today in this quarter for the next quarters. So there was a lot of digitalization to happen in the last year. So, of course, this has been leveraged by that there is a big movement because of the pandemic and other factors in the market. We believe we are able to hold that given the market perspective that we have today for the next quarters in terms of digitalization.

Unidentified Participant

Perfect. And I think the answer is very very clear. If I just, maybe a follow-up here. And so as you spoke about the C6, it's very clear. But as you add more partnerships. Obviously, we had, let us say the addressable market expense, but just trying to figure out the size of this opportunity. Do you believe there will be a like a cannibalization between the offerings. For example, the same guy buy Cogna will eventually not buy C6 Bank, is there any kind of or not really -- you can as you expense five, six, ten whatever a partnership you may have, the addressable market will just increase? Thank you very much.

Renato Ciuchini -- Vice President, Head of Strategy & Transformation

It's a very good question. And we have been working very hard on building data insights and data intelligence to make the right offer to the right customer at the right time. So building up this intelligence here has been instrumental for us to build new partnerships. Pietro is always pushing me to have more partnerships as soon as possible, and I'm always holding a little bit back, because I want to make sure that operationally, they are all possible at the same time. So if you have seen our commercial launch plans, they are very scheduled. We avoid to launch partnerships at the same time. The Cogna partnership came a year after the C6 took and the reason that we have done that was exactly to be able to digest the whole C6 partnership and when we are mature in that, we're able to launch a new one. We believe now we are reaching the maturity in the next months with Cogna and we are going to be able to launch the new ones early next year. So there is a lot of intelligence in terms of data to make the right offer to the right customer at the right time. In the same time, there is a maturity of the operations in a rollout scheme that allow us to be able to play all of them at the same time.

Pietro Labriola -- Director, Chief Executive Officer

I think that you perceive, we are not at all new ones is spoke at the plural. So we have to commercially launch in the first quarter of next year. The other ones. But now, we are joking with Renato, we will close the contract one or two by the end of this year. Also because, we are giving -- and so don't take this one is an official target, but we are working to say that we would like in our new plan to put the target that we must step 8-10 partnership that can generate a value in the three-five years, about BRL3-5 million. But we are working on that and we will formalize the target in the core with the financial market for the new year [Phonetic] plants. So, Renato has a job for the next three-five years.

Unidentified Participant

Thank you very much answering.

Renato Ciuchini -- Vice President, Head of Strategy & Transformation

Thanks Fred for the question.

Operator

Your next question comes from Mathieu Robilliard from Barclays.

Mathieu Robilliard -- Barclays -- Analyst

Good morning and good afternoon. I had two questions please. The first one is around costs, so obviously you flagged that there are some pressures on some items such as energy and we've also seen personal cost up in Q3, but you managed to increase your margin this quarter despite that, so I wanted to know if you could give us a little bit more color looking ahead, as to what are the positives and the negatives that will influence cost and whether you think conceptually, you can continue to increase your EBITDA margin. And then the second question was around the 5G auction, maybe you could remind us what is the exact deadline. So, you mentioned 4th of November. But I'm afraid I'm not entirely familiar with all the details in terms of when the bids are made, when the results are given. So if you could give briefly some color on that would be super helpful. Thank you.

Pietro Labriola -- Director, Chief Executive Officer

Well Matthew. Let us start again from the easiest question. Tonight Marigiasol [Phonetic] will deliver to the Anatel our envelopes with our offer. So the deadline is today all the player that will participate to the auction will have to deliver their first offer. On the 4th November there will be the auction that will be closed in the same day. Then there will be some times but Mario, can you give some more color about the next step of the auction?

Mario Girasole -- Regulatory and Institutional Affairs Officer

Yes, of course. Thank you for the question. And actually it will be tomorrow early in the morning. So tonight, we will close our envelopes, and tomorrow morning we will deliver to the delivery session that this -- there's tomorrow in Anatel and on November 4th there will be the auction session in which these envelopes will be opened and then of course if some competition calls on the several blocks, we will compete on it. Then that the following steps is the ratification of the results, and then the call to sign the authorization documents I -- we think that this will happen within mid-December. We think that all the process will be closer to still in '21 and then there are other steps, the creation of those entity to clean up the spectrum and so on.

Mathieu Robilliard -- Barclays -- Analyst

And in terms of the payment. If you can remind us, assuming --

Mario Girasole -- Regulatory and Institutional Affairs Officer

This depend, because at the signature of the authorization, you have to pay a minimum 5% of the offered price. Then there are other payments related to the entity of this clean up spectrum that we will occur in the next year, because two instalments are after the creation of the entity. Creation of the entity is within 75 days from the signature of the term. So summarizing, we will be at minimum 5% of the price offer this year and next year, there will be the payment of the year's.

Pietro Labriola -- Director, Chief Executive Officer

Matthew, if I can give you some more colors and then after the auction we will prepare specific presentation to give you all the details about the frequencies and from our quick calculation, because I think that you don't want to know the number in details but an idea. We will have the highest level of payment in 2022 could be something close to BRL2 billion more or less. Then we will have something very small by the end of this year. If it will happen and then, we will be progressively reduced because the auction is built in a way where we don't pay the frequencies. Part of the frequencies are paid in terms of commitment of network building. So the cash-out will be at during the years until 2029. This is not the case for example of other European country. If you see there are some reports that show that the Brazilian auction is one of the wise, the most-wise in the market, because it's much more focus in network building and not in cash out in favor of the government, but again with Camille and Bisanto [Phonetic] we will work after 4th November to give you some more details and idea about the cash out. And then for sure in our plan presentation that will be the first week of March, we will give all the details and the impact in our 3-year plan. Then we didn't forget, your question related to the cost there, it's clear that we will have some pressure that are related to the energy cost and inflation rate primarily and in part with the exchange currency rates. But on the exchange currency rate, our purchasing department jointly with their team did a great job and so we are starting to have contract in real. So with no index with the dollar and we were able to do that also with international company. I cannot mention the name but this is a new job that Bruno is doing to reduce our exposure to the exchange currency rate and then the contract that we still have in exchange currency rate in dollar have also some range in which we do not apply any kind of movement. This is the reason for which the impact on the exchange currency rate was very low. We -- our challenge will be on the inflation and on the cost of energy. We are working already for the next year plan trying to offset this impact with efficiencies in other area. For example, we are doing a great job on the CRM. So we are reducing the time that our attendants stay on the phone with the customer because what we are doing. If you remember Matthew, our target is to become the best Brazilian player by 2023 we want to become the best player, because this is not only a slogan. This allow us on the revenue side to justify with the customer a premium or an high price compared with the cheap offer. But in the meantime, if we are able to deliver a good quality of service, we have less cost either[Phonetic] and not either internally to manage the customer base. So all the cost for the CRM, our attendant all these kinds of things. And so, this is a part on which we are looking for efficiency. On the other side, if you remember one year ago, we were talking about the business process outsourcing as a leverage to improve our cost base in some area where we have to further automatize. We didn't forget that. We were unable to proceed during the COVID because it was very difficult during the COVID period to proceed on that. But by the end of this year, we will sign three or four BPO that will allow us to have a better cost base on so for the next year. Last but not least, when you see on the provision of the litigation. We did also with our legal department with Jack, a great job in the last two year to reduce the level of litigation with our customer base. And again, our strategy from volume to value and to increase the quality of service is paying off also on the cost base. So there's still room in our cost base to continue to be efficient. It's clear that you cannot work only on the bottom line, you have to work also on the top-line and for this reason it is very important, the activity that Alberto is put in place to continue to sustain our ARPU increase, and with Renato to continue to sustain new sources of revenues. But I think that we are doing a great job that put us in a very good position also to manage the challenges that the macro will put on the table. I hope that I was clear Matthew?

Mathieu Robilliard -- Barclays -- Analyst

You were super clear, thank you guys.

Operator

Without anymore questions from analysts, we will now start the public Q&A session from the webcast platform and will be read. Please Mr. Visente, you may proceed.

Vicente Ferreira -- Investor Relations Director

Good morning, everyone. This is Vicente speaking, Head of IR. The first question comes from Cesar Medina form Morgan Stanley. And his questions goes, was wondering if you had any comments from the recent trends in mobile number portability in mobile service growth that is a bit softer versus competitors. Thanks.

Pietro Labriola -- Director, Chief Executive Officer

Cesar, I agree with you on the second part of the question because in terms of mobile, number portability is not softer, we are improving our mobile number portability and to be clear for sure is a part of the great job that Alberto is doing on the commercial side but the other is slowing down. If you look at the EBITDA result and the cost base of other player, I think that the volume strategy is spring off on the contrary, because they are increasing their costs that are not completely reflected in the revenue grow because if you look at the growth in terms of customer base and the growth in terms of revenues year-over-year, but it's also because peculiar to look at the growth quarter-on-quarter. I think that there is something that is starting to not be so nice. We had with an amount of revenue that is much lower than some other player and absolute growth in terms of revenue quarter-on-quarter that is the same of another player that there's and higher level of revenue and also an higher level of net debts and also a worse level of EBITDA. So again, as I mentioned, all the time. It's clear that you have to do your job and you have to evaluate all the lines but if I look over the -- overall performance of TIM, it's much better of the other player. If you want, I can increase the amount of net debts but then you have to accept that the reduce the percentage of EBITDA margin that you have to manage. How much -- how many percent percentage point do we like I said that they will reduce my EBITDA to put an higher level of net debts, I think that the balance that we found with the positive net debts, the best EBITDA margin, the best cash generation is the right mix of all the things.

Vicente Ferreira -- Investor Relations Director

This was the last question. So Pietro will next move to the final remarks, please.

Pietro Labriola -- Director, Chief Executive Officer

Okay. Thank you to everybody and again I want to thank you all the team for the great job that they were able to achieve. I remember, we are reaching our guidance in a macro environment debt for sure wasn't the one that we were planning to face. So we were able -- we are able to achieve the target. Recovering also the challenges of the macro and so it's important to thank you our team. Again, we will start now the different meeting. And finally, we are back to meet some of you in-person that leave me very happy because human touch is always very important and I hope to meet you very soon. Last, but not least after the auction we will try to give you more details about what we are going to do and I hope to give you soon good news about our Oi deal. Thank you to everybody.

Operator

Thus, we conclude the third quarter of 2021 conference call of TIM SA. For further information and details of the company, please access our website on TIM.com.BR/ir. [Operator Closing Remarks]

Duration: 69 minutes

Call participants:

Pietro Labriola -- Director, Chief Executive Officer

Mario Girasole -- Regulatory and Institutional Affairs Officer

Camille Loyo Faria -- Chief Financial Officer

Leonardo de Carvalho Capdeville -- Chief Technology Officer

Alberto Mario Griselli -- Chief Revenue Officer

Renato Ciuchini -- Vice President, Head of Strategy & Transformation

Vicente Ferreira -- Investor Relations Director

Bernardo Guttmann -- XP Inc. -- Analyst

Diego Aragao -- Goldman Sachs -- Analyst

Marcelo Santos -- JP Morgan -- Analyst

Carlos Sequeira -- BTG Pactual Research -- Analyst

Leonardo Olmos -- UBS -- Analyst

Unidentified Participant

Mathieu Robilliard -- Barclays -- Analyst

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